We completed our pre-IPO analysis of IntraLinks today; the snapshot will be published and sent to email subscribers on Monday. In the process of doing our background work, we couldn’t help but take a look at the original company filings to go public from back in 2005.
For those that haven’t yet looked, the company provides a secure collaboration that can be used by multiple institutions. There are plenty of solutions that can be used behind firewalls, but Internet/cloud based solutions are harder to find and – when they exist – tend to be very narrow in scope.
IntraLinks has focused on this gap in the market and created a niche for themselves against large general purpose companies like EMC and IBM. Still, as the niche expands, they may find that this market space becomes more contested. Adobe, Microsoft and IBM could certainly give IntraLinks some trouble if they decide this is a market they care about. So far they don’t.
One key difference between today and 2005 is the CEO. The old one has been replaced by the individual who was then the head of sales and marketing, J. Andrew Damico. Not surprisingly, the highest expense line at the company is…sales and marketing. That said, the old CEO appeared to be fairly lightweight based on age and experience and we would have been critical of his background at the time had IPO Candy been in business back then.
Another more humorous change is in the underwriting team. The old one (JPMorgan, UBS, William Blair and RBC) was replaced with zero overlap by Morgan Stanley, Deutsche Bank, Credit Suisse, Jefferies, Lazard, Pacific Crest and Stifel Nicolaus. It looks like this deal was more competitive and all the banks probably pitched silly valuations for the company to get on the cover. Their research analyst,s of course, may not agree at all. That fun part comes 40 days after the IPO.
Lastly, the company was forced to undergo a major recapitalization in 2005 after the failed IPO to fund the business. So financial players own a large stake today and may be eager to sell when given the opportunity, especially if the shares continue to trade so far above the Intrinsic Value of the business.
Much to their credit, the company has gutted out nice growth and a diversified set of end markets and customers. They are bigger and far more established today in a niche space we believe is valid.
However, our analysis suggests the deal should have been filed with an $8 to $10 range rather than the current $14 to $16. Can’t wait to see who’s right on this one!